For many years, banks and other financial institutions have extended credit to consumers through the issuance of bank cards. Such cards, employing magnetic strips, holograms and other identifiers, which enable consumers to purchase goods and services while credit is extended at the point of purchase. In doing so, financial institutions generally prescreen card holders establishing a credit limit which the consumer is unable to exceed.
It is well recognized that considerable risk is associated with the issuance of bank cards to customers. Each time a customer makes use of his or her bank card, unsecured credit is extended. The default rate through the use of such cards is quite high in comparison to other types of loans, particularly those in which a security interest is taken by the financial institution. Nevertheless, bank cards have proven to be an exceedingly lucrative vehicle upon which banks and other financial institutions derive income.
There are a number of factors which add to the profitability and thus success of bank cards and which support the issuance of unsecured credit with these cards notwithstanding the heightened risk. Many cards have an annual fee payable by the consumer merely for the privilege of possessing the card and enjoying the flexibility of receiving credit contemporaneous to the purchase of goods and services. In virtually all instances, the financial institution charges an interchange fee, typically about 3% or more of the dollar value of the transaction, most of which goes to the financial institution that issued the bank card, but a percentage of which is attributable to the bank card entity, such as Visa, Mastercard, Diner's Club, American Express and Discover Card. Further, if purchases are not paid by consumers within the first billing cycle subsequent to the purchase, interest rates are imposed by the lending institution or bank at rates far higher than those established for secured loans.
In light of the above, it is well recognized that financial institutions and bank card issuers profit to such an extent that certain incentives have been offered to encourage bank card ownership and usage. For example, many lending institutions waive their annual fees. Other bank cards provide consumers with incentives including cash back or cash credits, airline, hotel and vacation credits and customer perks such as travel related services which are extended to bank card holders particularly in foreign countries. As an example, several lending institutions have established pre-existing relationships with airlines whereby for each dollar attributable to a purchase employing the subject bank card, one airline mile of free travel is credited to the consumer's account. This has proven to be quite successful as many bank card holders put virtually every purchase, from common every day groceries to major appliances and even automobiles on their bank cards in order to expand their airline mile credits. The use of incentives to promote bank card usage and the enhanced profitability to bank card companies and banks and lending institutions is a proven business model which has been successfully employed for many years.
Perhaps it is a gross understatement to suggest that earnings from bank cards are quite impressive. It has been determined that there are approximately two hundred million bank cards in the United States alone, each carrying an average monthly balance of $2,500.00 noting further that card holders average $250.00 per month in new purchases. Many of these cards, particularly those providing for purchasing incentives such as airline mileage require annual fees. Further, interest rates, as noted previously, tend to be quite high because of the unsecured nature of the bank card loans. In addition, vendors who accept bank cards for purchases must pay an interchange fee to the lending institution, a portion of which also is creditable to the bank card issuing organization. Each of these component parts add to the profitability which lending institutions and bank card companies enjoy.
It is thus an object of the present invention to provide a novel incentive program to encourage the use of a specific bank card over all others.
It is yet a further object of the present invention to provide a lotto or gaming feature to applicant's bank card to encourage use of this card over its competition.
These and further objects will be more readily apparent when considering the following disclosure and appended claims.